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Time of India
a day ago
- Business
- Time of India
Retail Inflation at 6-year Low; WPI Turns Negative
Live Events India's key inflation gauge dropped to pre-pandemic lows on the back of a sharp decline in food inflation, triggering hopes of another rate cut by the Reserve Bank of India (RBI). Retail inflation in June based on the Consumer Price Index (CPI) dropped to 2.1%, the lowest in more than six years and just shy of the lower end of the central bank's 2-6% target range, official data released Monday RBI is mandated to target 4% retail inflation within the range. This is the fifth consecutive month that CPI inflation has printed below 4%. Retail inflation is at its lowest since January 2019, when it was 1.97%.The Wholesale Price Index (WPI) slipped into the deflation zone, hitting a 20-month low of -0.1% in June against 0.4% in May. The drop in the inflation rate was driven by a decline in food and fuel prices and a moderation in manufactured goods. ICRA chief economist Aditi Nayar said a 25 bps cut in August cannot be ruled out, continuing the cuts seen this year in didn't concur.'This number will not have any impact on the policy decision and hence a status quo can be expected,' said Madan Sabnavis, chief economist at Bank of chief economist Rajani Sinha said, 'The Reserve Bank of India has already front-loaded the rate cuts anticipating moderation in inflation, hence we do not expect further rate cuts, unless economic growth weakens materially.'A basis point is 0.01 percentage its last policy announcement on June 5, the RBI cut the repo rate by more than expected 50 basis points, delivering a cumulative one percentage point reduction in calendar 2025 to boost demand. It also lowered the cash reserve ratio (CRR) by 100 bps, but shifted its stance to neutral from accommodative, suggesting a pause on monetary reasons that a slowing economy may bring an August rate cut by the central bank's monetary policy committee (MPC).'Given the weakness in a majority of the available high-frequency indicators, we foresee the gross domestic product (GDP) growth to print at 6.0-6.5% in Q1FY26, the data of which will only be available at end-August i.e. after the MPC's meeting,' said Centre will release GDP data for the June quarter in August. The MPC meets August inflation is expected to help prop up demand.'The declining inflation is expected to provide a significant boost to the real wages of the households in FY26,' said Paras Jasrai, associate director at India Ratings and Research (Ind-Ra). Jasrai said one more 25 basis point cut could still occur this fiscal year unless there are surprises from global developments or growth hits a average retail inflation rate was at a 25-quarter low of 2.7% in the June quarter, lower than the central bank's forecast of 2.9%, while average wholesale inflation dropped to a five-quarter low of 0.4%.Food inflation, a major component of CPI, slipped to deflation, coming in at -1.1%, the lowest in over six inflation, which excludes volatile food and fuel prices and signals demand pressures, rose to 4.4% in June, the highest since September 2023, largely due to an uptick in inflation dropped due to a favourable base effect and a fall in prices of vegetables (-19%), pulses (-11.8%), and meat & fish (-1.6%). Cereal inflation hit a 41-month low of 3.7%.Out of 22 major states and union territories, 10 recorded inflation above the national average, with Kerala leading at 6.7%, followed by Punjab (4.7%), Jammu and Kashmir (4.4%), Uttarakhand (3.4%), and Haryana (3.1%).
Economic Times
2 days ago
- Business
- Economic Times
Retail inflation hits over 6-year low of 2.10% in June; WPI turns negative
Retail inflation in India dropped to 2.1% in June, the lowest level since January 2019, driven by a sharp decline in food prices, official data showed Monday. This marked the fifth consecutive month that inflation based on the Consumer Price Index (CPI) remained below the Reserve Bank of India's (RBI) 4% target. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Stimulus for Demand Food inflation Tired of too many ads? Remove Ads Wholesale inflation India's key inflation gauge dropped to pre-pandemic lows on the back of a sharp decline in food inflation, triggering hopes of another rate cut by the Reserve Bank of India (RBI). Retail inflation in June based on the Consumer Price Index (CPI) dropped to 2.1%, the lowest in more than six years and just shy of the lower end of the central bank's 2-6% target range, official data released Monday RBI is mandated to target 4% retail inflation within the range. This is the fifth consecutive month that CPI inflation has printed below 4%. Retail inflation is at its lowest since January 2019, when it was 1.97%.The Wholesale Price Index (WPI) slipped into the deflation zone, hitting a 20-month low of -0.1% in June against 0.4% in May. The drop in the inflation rate was driven by a decline in food and fuel prices and a moderation in manufactured goods. ICRA chief economist Aditi Nayar said a 25 bps cut in August cannot be ruled out, continuing the cuts seen this year in didn't concur.'This number will not have any impact on the policy decision and hence a status quo can be expected,' said Madan Sabnavis, chief economist at Bank of Baroda CareEdge chief economist Rajani Sinha said, 'The Reserve Bank of India has already front-loaded the rate cuts anticipating moderation in inflation, hence we do not expect further rate cuts, unless economic growth weakens materially.'A basis point is 0.01 percentage point. In its last policy announcement on June 5, the RBI cut the repo rate by more than expected 50 basis points, delivering a cumulative one percentage point reduction in calendar 2025 to boost demand. It also lowered the cash reserve ratio (CRR) by 100 bps, but shifted its stance to neutral from accommodative, suggesting a pause on monetary reasons that a slowing economy may bring an August rate cut by the central bank's monetary policy committee (MPC).'Given the weakness in a majority of the available high-frequency indicators, we foresee the gross domestic product (GDP) growth to print at 6.0-6.5% in Q1FY26, the data of which will only be available at end-August i.e. after the MPC's meeting,' said Centre will release GDP data for the June quarter in August. The MPC meets August inflation is expected to help prop up demand.'The declining inflation is expected to provide a significant boost to the real wages of the households in FY26,' said Paras Jasrai, associate director at India Ratings and Research (Ind-Ra). Jasrai said one more 25 basis point cut could still occur this fiscal year unless there are surprises from global developments or growth hits a average retail inflation rate was at a 25-quarter low of 2.7% in the June quarter, lower than the central bank's forecast of 2.9%, while average wholesale inflation dropped to a five-quarter low of 0.4%. Food inflation, a major component of CPI, slipped to deflation, coming in at -1.1%, the lowest in over six inflation, which excludes volatile food and fuel prices and signals demand pressures, rose to 4.4% in June, the highest since September 2023, largely due to an uptick in jewellery. Food inflation dropped due to a favourable base effect and a fall in prices of vegetables (-19%), pulses (-11.8%), and meat & fish (-1.6%). Cereal inflation hit a 41-month low of 3.7%.Out of 22 major states and union territories, 10 recorded inflation above the national average, with Kerala leading at 6.7%, followed by Punjab (4.7%), Jammu and Kashmir (4.4%), Uttarakhand (3.4%), and Haryana (3.1%).'Such variation is symptomatic of varying food prices due to producing and consuming states being apart,' said inflation, which accounts for around one-fourth of the WPI weight, fell to a two-year low of -0.3% in June from 1.7% in contributors to food deflation included onions (-33.5%), potatoes (-32.7%), vegetables (-22.7%), and pulses (-14.1%). Fruit prices eased to 1.6% year-on-year in June compared to 10.2% in May.'The drop in prices of pulses was due to a robust kharif output,' said in manufactured products, which account for 64.23% weight in the WPI, eased slightly to 1.97% in June from 2.04% in May. Within this category, vegetable & animal oils and fats recorded the highest inflation at 23.1%, followed by food products (7%), and tobacco products (2.8%). Inflation in primary articles and fuel & power contracted by 3.4% and 2.7%, respectively.'The fuel & power and crude petroleum and natural gas prices declined during June due to benign global commodity prices,' said Jasrai.
Time of India
2 days ago
- Business
- Time of India
RBI's SDF sees record high of Rs 2.6 lakh crore in June quarter
ET Intelligence Group: The average quarterly balance in the Reserve Bank of India 's Standard Deposit Facility (SDF) hit a record high of ₹2.6 lakh crore in the June 2025 quarter-the highest since the facility was launched in April 2022. The total SDF balance in the June quarter increased three times year-on-year to ₹195.5 lakh crore, according to the RBI data. Banks have preferred to park the liquidity glut back with RBI this fiscal year so far amid lower credit offtake. The SDF allows banks to park surplus funds with the RBI overnight at a rate 25 basis points below the repo rate. The current SDF rate is 5.25%. To prevent this excess liquidity from bringing overnight rates below the repo rate, the RBI has initiated taking measures such as Variable Rate Reverse Repo (VRRR) auctions to absorb excess funds. According to Madan Sabnavis, chief economist, Bank of Baroda , banks are sitting on surplus funds after the RBI's liquidity injections between January and March. "However, with credit growth on a downward trajectory, they are unable to channel this excess into new loans," he said. Agencies Banks have been using the SDF route more often since its launch three years ago, as it does not involve a collateral, unlike for the reverse repo mechanism, where RBI has to transfer government securities to banks. However, the extent of funds parked in SDF have catapulted sharply in recent months. The average monthly funds in SDF rose year-on-year by 113%, 186%, and 340% in April, May, and June this year respectively. "Banks have the funds, but credit demand is not strong enough," said the chief financial officer of a private bank adding that the first quarter of a fiscal year is typically slow for loan growth. The RBI began injecting funds in January to counter a sharp decline in liquidity, primarily driven by its aggressive interventions in the foreign exchange market. The central bank had introduced several measures, including long-term repo auction, forex swaps and open market purchase of government securities. In December, it had cut the CRR by 50 basis points, releasing ₹1.16 lakh crore into the system. As a result, liquidity in the banking system swung to surplus from April. However, with the economy slowing and regulatory curbs by RBI on unsecured loans, credit growth is on a decline-falling to 9.5% in the June quarter from nearly 16% in FY24. To avoid adverse effects of the excess liquidity, RBI has been undertaking VRRR auctions. In July so far, the RBI has absorbed nearly ₹3.5 lakh crore through three such auctions. Unlike fixed-rate facilities, RBI does not set a predefined interest rate under VRRR. Instead, banks submit bids indicating the rate at which they are willing to park their surplus funds. "We expect to see continued liquidity-draining operations by the RBI to ensure there is not an overhang when credit demand remains weak." said Dhiraj Nim, an economist at ANZ.
Economic Times
2 days ago
- Business
- Economic Times
RBI's SDF sees record high of Rs 2.6 lakh crore in June quarter
Agencies Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel ET Intelligence Group: The average quarterly balance in the Reserve Bank of India 's Standard Deposit Facility (SDF) hit a record high of ₹2.6 lakh crore in the June 2025 quarter-the highest since the facility was launched in April 2022. The total SDF balance in the June quarter increased three times year-on-year to ₹195.5 lakh crore, according to the RBI have preferred to park the liquidity glut back with RBI this fiscal year so far amid lower credit offtake. The SDF allows banks to park surplus funds with the RBI overnight at a rate 25 basis points below the repo rate. The current SDF rate is 5.25%.To prevent this excess liquidity from bringing overnight rates below the repo rate, the RBI has initiated taking measures such as Variable Rate Reverse Repo (VRRR) auctions to absorb excess to Madan Sabnavis, chief economist, Bank of Baroda , banks are sitting on surplus funds after the RBI's liquidity injections between January and March. "However, with credit growth on a downward trajectory, they are unable to channel this excess into new loans," he have been using the SDF route more often since its launch three years ago, as it does not involve a collateral, unlike for the reverse repo mechanism, where RBI has to transfer government securities to banks. However, the extent of funds parked in SDF have catapulted sharply in recent months. The average monthly funds in SDF rose year-on-year by 113%, 186%, and 340% in April, May, and June this year respectively."Banks have the funds, but credit demand is not strong enough," said the chief financial officer of a private bank adding that the first quarter of a fiscal year is typically slow for loan RBI began injecting funds in January to counter a sharp decline in liquidity, primarily driven by its aggressive interventions in the foreign exchange market. The central bank had introduced several measures, including long-term repo auction, forex swaps and open market purchase of government securities. In December, it had cut the CRR by 50 basis points, releasing ₹1.16 lakh crore into the system. As a result, liquidity in the banking system swung to surplus from April. However, with the economy slowing and regulatory curbs by RBI on unsecured loans, credit growth is on a decline-falling to 9.5% in the June quarter from nearly 16% in avoid adverse effects of the excess liquidity, RBI has been undertaking VRRR auctions. In July so far, the RBI has absorbed nearly ₹3.5 lakh crore through three such auctions. Unlike fixed-rate facilities, RBI does not set a predefined interest rate under banks submit bids indicating the rate at which they are willing to park their surplus funds. "We expect to see continued liquidity-draining operations by the RBI to ensure there is not an overhang when credit demand remains weak." said Dhiraj Nim, an economist at ANZ.
CNBC
26-06-2025
- Business
- CNBC
CNBC's Inside India newsletter: Iran-Israel war sparks fresh interest in India's defense sector
India's economy was staring down a ravine over the past week. Geopolitical tensions in the Middle East could have battered the country. Instead, India found in the Israel-Iran war a catalyst to beef up its defense sector. The two Middle East countries agreed to a ceasefire on Wednesday, following a U.S. bombing campaign that U.S. President Donald Trump said obliterated Iranian nuclear ambitions. Oil prices gave up their short-lived gains, removing India from the precipice. But the episode highlighted many of India's vulnerabilities. India no longer buys Iranian oil, but 40% of its total crude imports still transit the narrow waterway of the Strait of Hormuz, one of the world's most crucial oil chokepoints. Any disruption would have meant a severe economic fallout for the country. For every $10 per-barrel increase in crude prices, India's consumer price inflation could rise by up to 35 basis points while economic growth could decline by 30 basis points, according to an analysis by SBI Research. Madan Sabnavis, chief economist at the Bank of Baroda, a majority government-owned bank in India, echoed that estimate, warning that, while a 10% price hike was manageable, a sustained price above $100 per barrel "can have a major impact." The conflict also puts New Delhi in a tight spot between its investments in Iran — notably the Chabahar port, which is operated by Indian companies — and its deep and growing defense relationship with Israel. India is the single largest buyer of Israeli arms, accounting for 34% of its defense imports, according to a March 2024 report by the Stockholm International Peace Research Institute. India's recent "Operation Sindoor" against Pakistan, launched after an April militant attack in Jammu and Kashmir, reveals the depth of this dependency on arms imports, according to analysts at investment bank Jefferies. The operation utilized a mix of old Russian gear and new Israeli-made equipment, including Heron surveillance drones, Spyder and Barak-8 surface-to-air missile systems. Soon after Russia invaded Ukraine, India found that Moscow, historically a top arms supplier, had become unreliable. Russian defense manufacturing capacity was directed toward Moscow's own needs for the war in Ukraine, causing significant delays for India's military modernization program. Worse still, analysts point out that Russian equipment, such as the T-90S tanks that are a staple of the Indian Army, appeared to have "underperformed" in Ukraine. India would certainly not have wanted to suffer yet another delay in weapons procurement, were the Iran-Israel conflict to drag on. This has created an urgent need for India to pivot. The transition, however, is more likely to take years, if not decades, as 90% of India's armored vehicles and 70% of its combat aircraft were of Russian origin as of 2023, according to research from Bernstein. "I think undoubtedly the situation will have increased the desire and conviction that all the countries have to increase their defence spending, which was initiated because of the Russian invasion of Ukraine," said Anna Mulholland, head of emerging market equities research at Pictet Asset Management. The firm's emerging market fund has India as the second-largest allocation. "The Middle East turmoil, while not new, will surely have increased people's resolve and commitment to do those increased defence budgets that have been spoken about," she added. Out of this crisis, India has made an opportunity to grow its domestic defense industry. Analysts at JPMorgan identified the recent geopolitical conflicts as a "pivotal moment for widespread recognition of BEL's capabilities," referring to the state-owned Bharat Electronics. The stock is up around 38% so far this year. "A steady stream of orders, elevated geopolitical risks both in India and globally, and strong medium-term growth prospects … with healthy [return on equity] should continue to lead to outperformance, in our view," said JPMorgan's Atul Tiwari, an executive director at the bank, in a note to clients on June 23. The most tangible sign of this pivot is "Project Kusha" — India's homegrown alternative to the Russian S-400 air defense system, in which BEL is a key development partner. "This program is expected to contribute significantly to the company's long-term order book once contracts are finalized," JPMorgan's Tiwari added. India is unlikely to be the lone customer for those companies. New Delhi is also targeting defense manufacturing as an export industry. It aims to double exports to nearly $6 billion a year by 2030, according to Nim from ANZ notes that while the recent rise in global oil prices pose downside risks for the rupee, the "shaky" ceasefire between Iran and Israel has helped stabilize investor sentiment and improved near-term outlook for the currency. Frederic Neumann, chief Asia economist at HSBC and Tim Seymour, CIO at Seymour Asset Management, see EM as undervalued, with Korea, India, Vietnam standing out. India will produce a $100 billion tech company. That's according to the CEO of Proseus, one of the biggest tech investors in the world. Proseus has invested in the buzziest tech firms in India, such as payments service PayU and e-commerce company Meesho. Mixed picture for India's economy. The Reserve Bank of India noted that factory and services activity in May remained healthy, but urban demand slowed sharply. Capital injection for Air India. During India's financial year 24-25, Tata Sons and Singapore Airlines pumped in 9,588 crore Indian rupees ($1.1 million) in the airline. Air India is dealing with a tragic air crash on June Nifty 50 hit its 2025 high at 25,549 points. Investors rushed into equities after easing tensions in the Middle East. The index added over 2% since last week and gained more than 7% in the year to date. The benchmark 10-year Indian government bond yield moved lower by 3 basis points compared to last week and now trades at 6.27%. June 30: India industrial output in May July 1: Industrial gases manufacturer Ellenbarrie Industrial Gases IPO, construction agency Globe Civil Projects IPO, India manufacturing PMI in June July 2: Loans provider HDB Financial Services IPO July 3: India services PMI in June
